Jack Townsend offers this blog on Federal Tax Crimes principally for tax professionals and tax students. It is not directed to lay readers -- such as persons who are potentially subject to U.S. civil and criminal tax or related consequences. LAY READERS SHOULD READ THE PAGE IN THE RIGHT HAND COLUMN TITLE "INTENDED AUDIENCE FOR BLOG; CAUTIONARY NOTE TO LAY READERS." Thank you.

Wednesday, January 27, 2016

Final Swiss Bank Achieves NPA Under Swiss Bank Program (1/25/16)

DOJ Tax announced here the final Category 2 resolution in its Swiss Bank Program, here, as follows:

HSZH Verwaltungs AG

$49.757 million

The press release opens with DOJ Tax touting the results achieved under the program (emphasis supplied by JAT):

The Department of Justice announced today that it reached its final non-prosecution agreement under Category 2 of the Swiss Bank Program, with HSZH Verwaltungs AG (HSZH). The department has executed agreements with 80 banks since March 30, 2015, when it announced the first Swiss Bank Program non-prosecution agreement with BSI SA. The department has imposed a total of more than $1.36 billion in Swiss Bank penalties, including more than $49 million in penalties from HSZH. Every bank in the program, including HSZH, is required to cooperate in any related criminal or civil proceedings, and that cooperation continues through 2016 and beyond.

* * * *

“The department’s Swiss Bank Program has been a successful, innovative effort to get the financial institutions that facilitated fraud on the American tax system to come forward with information about their wrongdoing – and to ensure that they are held responsible for it,” said Acting Associate Attorney General Stuart F. Delery. “As we have seen over the last year, Swiss banks are paying an appropriate penalty for their misconduct, and the information and continuing cooperation we have required the banks to provide in order to participate in the program is allowing us to systematically attack offshore tax avoidance schemes.”

“The completion of the agreements under Category 2 of the Swiss Bank Program represents a substantial milestone in the department’s ongoing efforts to combat offshore tax evasion, and we remain committed to holding financial institutions, professionals and individual taxpayers accountable for their respective roles in concealing foreign accounts and assets, and evading U.S. tax obligations,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. “Using the flood of information flowing from various sources, the department is investigating this criminal conduct, referring appropriate matters to the Internal Revenue Service for civil enforcement and pursuing leads in jurisdictions well beyond Switzerland. Individuals and entities engaged in offshore tax evasion are well advised to come forward now, because the window to get to us before we get to you is rapidly closing.”

As to HSZH, the history is presented as follows:

HSZH, the final bank to reach a non-prosecution agreement under Category 2 of the Swiss Bank Program, was previously known as Hyposwiss Privatbank AG. HSZH was founded in 1889 in Solothurn, Switzerland. In 1988, Schweizerische Bankgesellschaft AG, which was later merged into UBS AG, acquired the bank and renamed it Hyposwiss Privatbank AG. Hyposwiss Privatbank AG increasingly focused on private banking activities, servicing both domestic and international clients, and at all times, HSZH solely operated on Swiss territory. In 2002, the bank was acquired from UBS by St. Galler Kantonalbank (SGKB), the state-owned cantonal bank of St. Gallen. In 2014, HSZH unwound its residual banking operations under the supervision of FINMA, the Swiss banking regulator. On Jan. 6, 2014, and in connection with the wind-down, the bank changed its name to HSZH Verwaltungs AG. HSZH returned its banking license, and FINMA released HSZH from its supervision on Nov. 27, 2014.

The bank will be added to the IRS's Foreign Financial Institutions or Facilitators, here. As indicated in the last quoted paragraph, accountholders in the listed banks joining OVDP after one of their banks are listed will be subject to the 50% penalty in OVDP (provided that they do not opt out, in which case, who knows).

The updated statistics are:

US DOJ Swiss Bank Program

Number

Number Resolved

Total Costs

U.S. / Swiss
Bank Initiative Category 1 (Criminal Inv.) *

16

4

$3,470,550,000

U.S. / Swiss
Bank Initiative Category 2 **

98

80*

$1,363,683,990

U.S. / Swiss
Bank Initiative Category 3

14

$0

U.S. / Swiss
Bank Initiative Category 4

8

$0

Swiss Bank Program Results

136

$4,834,233,990

* Includes subsidiary or related entities counted as
separate entities, so the numbers may exceed the numbers the IRS and DOJ
posted numbers which combine some of the entities.

** DOJ says original total was 106 but that it expects
about 80 to complete the process.

* As revised on 1/30/16 to exclude Finacor S.A., an asset manager, which attempted to join the program under Category 2 but, since not a bank, was determined to be ineligible but achieved an NPA under the Category 2 terms.

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